Wilmington, Delaware – August 30, 2016 – At Comparison Shopping Inc, everything we do is seen through the prism of our motto to “Help Consumers Make Better Buying Decisions”. One of the benefits of our research is that it uniquely positions us to see patterns in various niches. And as an objective third party, we notice things that may be obvious to those WITHIN an industry, but are lost to the buying public at large.
In the extended service contract (aka “car warranty”) market, we have discovered something that every consumer should know.
It’s no secret that the vehicle service contract industry has had its share of controversy over the years. In spite of widespread crackdowns on illegal and unethical business practices – much of it continues to this day. In many cases, consumers are purchasing worthless contracts and find themselves unable to go after the companies who rob them of their money through underhanded tactics. What’s more, legitimate businesses struggle to attract customers due to these bad apples which taint the entire industry.
Scams Still Present
While many states have taken significant action to eliminate the worst offenders, some businesses are still up to the same tricks and continue to take advantage of consumers. Unless a prospective new customer is given specific guidance, they are most likely not aware of underhanded tactics to look out for. As a result, they often find out too late that the policy they purchased isn’t worth the paper it’s printed on.
The most glaring offenders are companies which sell service contracts that are not backed by an A.M. Best Rated Insurance company. This added level of protection is necessary to ensure consumers are covered in the event the company goes out of business or its administrator is otherwise unable to pay claims. In most states, if a company does not meet this insurance regulation, they are selling illegally.
One such company is Delta Auto Protect. Not only are they selling contracts without the required insurance, they also employ aggressive sales tactics when it comes to getting customers to sign up. For example, a prospective new customer recently contacted them and was offered a contract in California where it appears Delta Auto Protect doesn’t have insurance to back the policy. Almost immediately, the consumer was asked for payment information without having any concrete facts about what they were paying for. When they asked to see something in writing, they were referred to a “sample” contract online which contained no evidence of insurance regarding the policy in question.
Similar situations are occurring when people contact companies like Protect My Car and ASAPWarranty.com. In addition to selling contracts that aren’t backed by insurance, it appears they only presented “sample” contracts by way of a link on their website. One customer told us that a representative from ASAP Warranty offered to lower their price only if they would make the payment right then and there. These high pressure tactics often result in consumers making decisions they would not otherwise make if given the time and necessary information.
One way companies are getting around this is by saying plans they offer are insured and then transitioning to an uninsured contract upon signup. Again, selling uninsured contracts is what caused so much trouble in the industry to begin with and pressure tactics to get consumers to pay upfront without valid documentation only exacerbates the situation. Unfortunately, an uninformed consumer is often likely to make such a purchase, typically obtaining nothing more than a useless contract.
Sins Of The Past Continue To Hurt Consumers Today
These illegal tactics continue to hurt consumers and blemish an industry that is still trying to recover from a painful past. Because of these unethical companies, reputable businesses within the industry have had to fight along with legislators to maintain the industry’s integrity. Unchecked predatory selling practices make it harder for consumers to know who to trust when searching for a way to insure themselves against expensive vehicle repair bills.
Wanted Auto Protect is an example of a company which inflicted serious harm through fraudulent activity. In May of 2016, the company announced they were closing their doors, but the damage had been done. Due to their unsavory business practices, the Better Business Bureau of New Jersey was flooded with complaints prompting them to begin an investigation shortly before the business announced its closing.
Yet another company that has hurt consumers was Direct Buy Associates or as they are more commonly known, Direct Buy Auto Warranty. One of their most serious transgressions was telling customers that all repairs would be paid for when in fact their contracts contained multiple exclusions, forcing consumers to pay for the majority of their repairs themselves.
Consumers Must Be Protected
We spoke with a representative of the VPA (Vehicle Protection Association) who told us they advocate regulatory compliance among their members – but do not monitor companies outside their association. Even some “consumer advocacy” sites like ConsumerAffairs.com are further confusing the issue. Not only are they offering full-blown Accreditation to some of these companies (thereby artificially boosting the offending company’s credibility), they also knowingly refer large numbers of new customers to them through their platform every month in return for a sizable monthly fee.
Legitimate consumer protection agencies as well as local, state, and federal lawmakers must find a way to work with reputable businesses in the industry to prevent history from repeating itself. When predatory companies are allowed to operate, it hurts consumers, businesses, and the economy as a whole. It punishes those businesses within the industry which provide valuable and honest services to their customers. It also gives consumers a false and dangerous sense of hope for coverage that doesn’t exist and often costs them a tremendous emotional and financial price when expensive repairs are needed.
If legislation can’t put a stop to these businesses, then more must be done to educate consumers. They should be made aware of what a legitimate vehicle service contract consists of and how to choose the business they buy from wisely. Getting the word out will help cut down these illegal activities, point consumers to honest businesses and begin rebuilding trust in the vehicle service contract industry.
*Editor’s note: Multiple attempts were made to reach Delta Auto Protect, asapwarranty.com and Protect My Car by both phone and email. We were unable to reach anyone willing to speak on behalf of the company to provide proof that all their policies are backed by an AM Best rated insurance company in states that require it and no response has been received to our messages as of the posting of this article.
Updates to this article can be found at: http://www.comparisonshop.com/underhanded-tactics-vehicle-service-industry-continues-punish-consumers/
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